Sugarbeet News

THE OPPOSITION: What sugar reform activists believe should happen to the U.S Sugar Policy in the upcoming Farm Bill

By Treasure Coast Newspapers Editorial Board

You spy that bag of M&Ms in the checkout line and you're tempted. But $1.79 seems kind of steep.

In fact, it is. Most food containing American-grown sugar costs significantly more than it would if sugar prices were lower.

But sugar prices are inflated by design, a result of a federal program originally passed in 1934 to protect sugar growers from foreign competition.

For the domestic sugar industry, it's been a sweet deal indeed.

But a growing bipartisan coalition has soured on sugar policy, and might be on the cusp of forcing significant changes.

An unlikely alliance of Democrats and Republicans, free-market advocates and environmentalists, small businesses, retailers and food manufacturers are backing the Sugar Policy Modernization Act, which promises to roll back artificially high U.S. sugar prices by reforming price supports.

U.S. sugar policy is protectionist, anchored in government intervention in the free market. The government sets minimum sugar prices and provides loans to sugar farmers, permitting them to repay those loans with raw sugar if prices fall below the legal floor.

Foreign imports are limited, and "sugar marketing allotments" limit the amount of domestically produced sugar that processors can sell each year, eliminating the prospect of overproduction.

Unsurprisingly, this drives up the price of sugar; American manufacturers can pay twice as much for sugar as the rest of the world.

That shows up in your grocery bill.

To be sure, current sugar policy has been beneficial for some communities in South Florida. The industry claims to support an estimated 30,000 direct and indirect jobs here, and thousands more in other sugar-growing regions of the country.

Naturally, the industry is hostile to the proposed Modernization Act, labeling it the "Sugar Farmer Bankruptcy Bill." And should the measure be included in the next five-year Farm Bill, sugar interests claim it could lead to massive oversupply, creating a collapse in prices and, ultimately, a loss of sugar production and jobs.

Much of the economy in the Glades, made up of Pahokee, Belle Glade, South Bay and Clewiston, revolves around agriculture, including the Sugar Growers Cooperative of Florida mill, seen on Feb. 28, 2017, in Belle Glade. (Photo: LEAH VOSS/TCPALM)

In turn, they say, that could cause major disruption in the food-supply chain for food manufacturers and consumers.

These are legitimate concerns that must be taken seriously.

Yet there is convincing evidence that whatever the limited, regional impact the Sugar Policy Modernization Act might have here, it could be a boon for U.S. consumers on the whole.

One 2011 report concluded that if U.S. sugar prices fell by one-third, U.S. consumers could save as much as $3.5 billion.

Proponents also say it could boost overall employment, citing federal studies that suggest every sugar-processing job subsidized via artificially high U.S. sugar prices costs three American manufacturing jobs.

In a letter to U.S. Sen. Bill Nelson, 11 environmental organizations asked the Florida Democrat to support the proposal and asserted the mass production of sugar cane in the Everglades Agricultural Area "remains a great impediment" to efforts to restore the Everglades.

Via current sugar policy, "American consumers and taxpayers have lined the pockets of sugar companies," the letter states — and that has led to the inordinate political clout the industry wields here in Florida and nationwide.

The sugar industry counters these claims.

"Sugarcane farmers have been the largest private partner in Everglades restoration efforts for more than 20 years, cleaning every drop of water leaving their farms, and paying nearly $450 million in taxes to further clean water and fund research into continued restoration efforts and have given up 123,000 acres of productive farm land for restoration projects," said Judy Sanchez, spokesperson for U.S. Sugar, in response to a recent inquiry.

A message to Florida Crystals seeking comment was not returned.

Other defenders of the current sugar program cite the heavy subsidization of the sugar industry in countries like Mexico. If there's truly to be a level playing field, they say, foreign competitors must play by the same rules.

That sentiment may resonate in Washington, where President Donald Trump has enacted new tariffs, moves he claims are necessary to protect and rebuild vital domestic industries harmed by unfair foreign competition.

Yet the sugar industry has enjoyed such protection for more than 80 years. This has been good for the industry, but the drawbacks for the rest of the country are clear — and it's time, finally, for a change.

Editorials of Treasure Coast Newspapers/TCPalm are decided collectively by its Editorial Board. To respond to this editorial in a letter to the editor, email up to 300 words to TCNLetters@TCPalm.com.

Phillip Hayes, Director of Media Relations for the American Sugar Alliance, delivers a presentation at the Nebraska Sugarbeet Growers Association meeting Thursday, Feb. 22, at the Gering Convention center.

SPIKE JORDAN/Star-Herald

GERING — Phillip Hayes, director of media relations for the American Sugar Alliance, gave a brief history of American Sugar Policy during his presentation Thursday to the Nebraska Sugarbeet Growers Association at the Gering Civic Center.

Hayes said that the U.S. has not always had a strong domestic sugar industry, which can be detrimental given sugar’s central importance to the U.S. diet.

On Jan. 30, 1942, 54 days after the Japanese surprise attack on Pearl Harbor, Hawaii, launched the U.S. into World War II, the Emergency Price Control Act granted the Office of Price Administration (OPA) the authority to set price limits and ration food and other commodities. The first item on their list was sugar, which at the time the U.S. was heavily reliant on imports to meet consumer demand. By Spring of ‘42, Americans were unable to purchase sugar without using government issued coupon books. Long lines were often seen outside stores where sugar would quickly be sold out before those in line had a chance to purchase it. Families would often have to pool their sugar together to make a single birthday cake.

And by the end of the war, restrictions on foods and fuel were lifted, however, the sugar ration remained in place until 1947. The shortages and demands created during World War II were the impetus for U.S. sugar policy today which favors domestic production and limits imports.

U.S. sugar policy, which operates under the Farm Bills overwhelmingly passed in 2008 and 2014, is based on the common-sense notion that supply and demand should be in balance.

Sugar is the cheapest major commodity program because sugar farmers do not receive subsidy checks. To ensure that sugar policy runs at limited cost to taxpayers, the U.S. Department of Agriculture (USDA) has three tools at its disposal. The agency can slow the flood of foreign imports to those required by our trade agreement obligations (however, Mexican imports are unlimited under NAFTA), it can limit the amount of sugar American farmers can sell, and it can divert surpluses caused by excessive imports into non-food use.

Each year, the USDA forecasts U.S. sugar consumption and decides whether to limit the amount that U.S. producers can market, and allocates market share to 41 foreign countries based on U.S. import commitments in trade agreements, such as the WTO and CAFTA. By avoiding oversupplies and shortages, sugar prices stay stable And the fair prices eliminate the need for government payments to farmers.

However, that system is now under attack, Hayes said in a bellicose tone.

In an recent interview with Politico, Christopher Gindlesperger, vice president of public affairs at the National Confectioners Association, said the U.S. sugar program “really only benefits 13 mega-sugar producers” and is “such an outdated and outrageous program.”

On Wednesday A coalition of business groups sent a letter to Congress on Wednesday calling for passage of bipartisan legislation that would reform the sugar program. In the letter, organized by Citizens Against Government Waste, the groups describe the United States’ sugar program as “an outdated, Soviet-style command-and-control scheme that uses import quotas, loans, marketing allotments, price supports, and tariffs to artificially inflate the price of sugar.”

Politico reports the bill could move through House Agriculture Committee as soon as next month, setting up another fight between sugar producers and both pro-business groups and candy makers.

However, when Hayes asked the Sugarbeet growers in the room if they felt they were operating in a risk-free environment, many in the audience shook their heads “no.”

Unlike other nations, the United States does not directly subsidize sugar, which lends it subject to global predatory trade practices, Hayes said.

“We cannot depend on foreign sugar producers to meet America’s need,” he said. “We’ll get burned if we do.”

The global market, Hayes said, is a dump market which only represents about 25 percent of global production, This means foreign producers dump their excess surplus on to that market so that it does not depress their domestic market.

By eliminating the Sugar Policy, its opponents argue that sugar will become cheaper and drive down food costs. However, this is misleading, Hayes said. Of the 120 countries globally grower sugar, and not a single country doesn’t have some form of government intervention. In the U.S. sugar production is financed through the Commodity Credit Corporation, meaning growers pay back loans with interest at zero cost to tax-payers. Government assistance also comes in the form of subsidized crop insurance which growers purchase to protect their crops in the event of drought, weather or other natural disasters.

“The National Confectioners Association wants the United States to become the only country ever to not have any government intervention in sugar,” Hayes said. “They also want us to become the only country in the history of mankind to not have a farm policy.”

A prime example, Hayes said, is Brazil, which he referred to as the “OPEC of Sugar.”

In his analogy, Saudi Arabia control 17 percent of the global petroleum market. However, when you look at Brazil, it’s heavily subsidized sugar industry which stems from ethanol production, controls 50 percent of the world market.

“They talk a lot about the world dump market, which is depressed by foreign subsidies,” he said.

However, the dump market is raw sugar, so it’s not refined. The priced doesn’t include transport from Brazil. It doesn’t include the cost of storage, and the logistics to get it to confectioneries.

In comparing refined sugars, Hayes said that consumers in the U.S. pay 22 percent less for a bag of sugar at the supermarket compared to other developed countries. The international sugar organization found that food makers in the U.S. pay 25 percent less than their competitors in the U.S.

And when individuals factor for inflation, sugar prices are 44 percent cheaper than they were in the 1980s Hayes said, but the inputs for growers and sugar processors have not gone down.

“That’s the story that is not getting out and that’s the story that needs to be told on Capitol Hill,” he said. “It’s not just that sugar prices are down 44 percent — that’s just a number. Let’s talk about the pain of sugar prices being down 44 percent. It’s hard to make ends meet.”

Hayes then segued into discussing a bill known as “The Sugar Policy Modernization Act” which he sees as a threat to the American sugar industry.

“In D.C.-speak, the words modernization and reform really equate to repeal and weaken,” he said. “It sounds modest, but it’s not. This is about annihilation ... They want to drive you out of business, and outsource our production to Brazil, Thailand and Mexico.

“They want that sugar subsidized by tax payers somewhere, and they realize that we won’t subsidize it by tax-payers here in the United States, so let it be subsidized somewhere else.”

Hayes declined to use the actual name of the bill, and instead referred to it as “The Sugar Farmer Bankruptcy Bill.”

One part of the bill concerns a stocks-to-use ratio, which concerns how much sugar is on the market, Hays said.

“When the USDA targets the program, they try to manage anywhere from a 13.5 percent to 14.5 percent stocks-to-use ratio,” he said.

However, that ratio isn’t written into law, giving the agency flexibility with the rules.

“What this bill would do is says it has to be at least 15 percent, meaning they can’t let it slip below that number, which means they have to raise it up to 17.5 percent,” he said. “That will devastate this market. It would be the first time ever that they have mandated oversupplies on the market.”

The bill would also eliminate the non-recourse loans, which act as government-funded mortgages. Sugar is put up as collateral, and if the loan is not repaid the sugar is forfeited to the government. The bill would remove the ability to put up sugar for collateral, preventing many cooperatives and growers from securing the credit they need.

“You are legally mandated to pay the loan with cash, and if you can’t you go out of business,” he said. “They also want to lower the loan rate and depress prices. Every penny you lose is $2 million in the market place.”

It’s not the first time the American Sugar Alliance has faced off with the confectionery lobby, Hayes said. Five votes on sugar policy were seen in the 2014 farm bill, and luckily, all of them were defeated, he said.

“I used to tell reporters that we’ve had more votes on the sugar program than we’ve had Obamacare,” he said. “We spend zero dollars on sugar policy, yet we had five votes.”

Hayes said it’s a tale of two industries. Since 1985, 54 factories have closed in the U.S., taking 100,000 sugar jobs with them. In December, the Hawaiian sugar industry ended its 100 year tradition of harvesting and processing sugar cane, as the last company on the island was pushed out due to illegal dumping of Mexican sugar on the market, which broke U.S. trade law.

“That’s what people need to understand in Washington — once sugar factories close, they don’t reopen,” Hayes said. “There is no miracle that comes in to save those communities.”

On the flip side, since 2014, the confectionery industry has expanded 100 new facilities, the bulk of which belong to Mexican and European companies.

If you’ve got a sweet-tooth, you might want to consider how the sugar industry is affected by the Farm Bill. The United States is the fifth-largest producer and consumer of sugar in the world. Title I houses the Sugar Program, which supports the sugar industry by maintaining a market price for sugar. Its purpose is to protect the income of sugar industry growers of sugar beets and sugarcane and the firms that process sugar from these crops. Sugar producers are looking for a strong program in the upcoming Farm Bill, to ensure the industry doesn’t cost thousands of jobs and closures of refineries across the nation due to increased import and competition.

Groups such as the Coalition for Sugar Reform are demanding reform of the program, which hasn’t been touched in years. They believe it is hurtful to small, family owned businesses and has caused the loss of jobs. In November 2017, U.S. representatives from multiple states introduced new legislation that would aid in the reformation of the Sugar Program, which the coalition applauded.

“The Sugar Policy Modernization Act protects taxpayers and ensures accountability by requiring the sugar industry to pay back any taxpayer dollars they receive when they forfeit on government loans,” the coalition said in a news release. “The bill safeguards taxpayers and also removes a program whereby the Department of Agriculture tells sugar farmers how much sugar they can grow and sell. Reforming the sugar program will lift an existing hidden tax on Americans and make the sugar program work for everyone. Importantly, this legislation will ensure that the sugar program will operate at a true net zero cost to taxpayers.”

According to American Sugar Alliance, “Sugar is the cheapest major commodity program because sugar farmers do not receive subsidy checks. To ensure that sugar policy runs at limited cost to taxpayers, the U.S. Department of Agriculture (USDA) has three tools at its disposal. The agency can 1) slow the flood of foreign imports to those required by our trade agreement obligations (note: Mexican imports are unlimited under NAFTA), 2) limit the amount of sugar American farmers can sell, and 3) divert surpluses caused by excessive imports into non-food use.”

There are three ways the Farm Bill program supports the domestic sugar industry, as explained by American Sugar Alliance:

Non-Recourse Loans: “As with virtually all farm programs, government loans are available to U.S. sugar producers. Producers usually repay the loans with interest. But if the USDA lets too much sugar on the market and prices fall below the loan rate, the debt can be satisfied with the crop that was put up as collateral.”

Tariff Rate Quota: “Foreign sugar import quotas set at the beginning of the year at the amounts agreed to under international trade agreements. Nearly all enters duty free. If the U.S. market is under-supplied, the USDA can increase the TRQ. America is the world’s largest sugar importer, importing sugar from 41 countries regardless of its needs.”

Overall Allotment Quantity: “This is the portion of America’s sugar market allocated each year to U.S. sugar producers. The OAQ, which cannot be set by the USDA at less than 85% of the U.S. market, helps ensure stable prices by avoiding oversupplies. Companies that produce more sugar than they may sell store the surpluses at their own expense, not the government’s.”

Furthermore, there are two other initiatives to protect the sugar industry listed by group, SugarCane.org, these are:

International Trade Agreements: The North American Free Trade Agreement (NAFTA) has provided Mexico with tariff-free sugar exports into the US market since January 1, 2008. The Dominican Republic-Central American Free Trade Agreement (DR-CAFTA) also includes attractive sugar provisions that provide those countries with guaranteed TRQs. The import quotas started at a total of 109,000 tons in 2006, grow to 151,140 tons in 2020, and then increase by 2,640 tons per year into perpetuity.

Sugar-to-Ethanol Program: Under another provision of the 2008 Farm Bill, the U.S. government can sell excess sugar (for instance, unneeded supplies generated by generous price supports) to ethanol producers at a significant loss. With this program, ethanol producers can pay for sugar the equivalent of what they pay for less-expensive corn. This provision further protects the U.S. sugar market.

It looks like sugar producers are wanting a complete overhaul of the largely ignored Sugar Program for the 2018 Farm Bill. This should be interesting to see in the upcoming months. As a sweet-tooth myself, I sure want to protect this commodity!

Markie Hageman is a senior, majoring in agribusiness, at Fort Hays State University. She is actively involved in her state Cattlemen’s Association, Young Farmers chapter, and National Cattlemen’s Beef Association. Follow her series exploring various parts of the next Farm Bill.

Nebraska sugar beet farmers convened for our annual meeting; researchers shared their latest work; legislative aides for our elected officials discussed the upcoming Farm Bill and reiterated their support; and staff from our national coalition – the American Sugar Alliance (ASA) – flew from the East Coast to tour the sugar factory and get to know our community.

One comment made during their visit has stuck with me. An ASA representative observed: “If every lawmaker could just come to Scottsbluff and meet these families and see this community, then no one would ever try to weaken sugar policy.”

He saw what we’ve all known for generations. Western Nebraska is a special place made up of special people. Our little community humbly and proudly produces a reliable supply of premium sugar for grocery shoppers and food manufactures across the country.

No one here wants a handout. We just want the chance to tend our farms, work our businesses, raise our families and contribute to the community.

We want to be treated fairly, but unfortunately we are not being treated fairly right now. It’s been four years since Mexico broke U.S. trade law and wrecked our market with a flood of subsidized sugar.

While the trade problem was finally fixed last summer, we don’t get any compensation from Mexico for being injured. Much of our sugar had already been sold at depressed prices, and we will not see any benefits from a recovering market until the 2018 crop we harvest this Fall is sold. So, while the future looks brighter, we are still reeling.

Of course, these lobbyists have never set foot on a sugar farm or sugar factory. Yet, they are trying to rewrite the laws that will determine the future of our farms, our factories, our friends and our families.

These opponents of agriculture are looking to make it impossible for sugar producers to get the loans needed to support our operations while we store sugar for customers and await payment. And they want to force the U.S. Department of Agriculture (USDA) to oversupply the U.S. market with more subsidized imports.

The result of this plan, if adopted by Congress, would mean even lower prices and likely the end of a lot of sugar farms and factories. Obviously, this kind of low-priced environment would devastate Scottsbluff.

It’s a scary thought, but it got me thinking: “If every lawmaker could just come to Scottsbluff and meet these families and see this community, then no one would ever try to weaken sugar policy.”

That will never happen, but we can take Scottsbluff to Washington, D.C.

Another local grower, Mario Pitts, and I will travel to Washington this week where we will join dozens of sugar beet and sugarcane farmers nationwide to share our stories. At the end of two weeks, sugar farmers will have visited more than 320 congressional offices.

Our message is simple: “Don’t cut our families out of the Farm Bill.”

This will be one of the most important trips we’ve ever taken, and we are honored to represent the whole community there. Failure is not an option because if our sugar policy is weakened, things will look a lot different for future visitors to Scottsbluff.

About the author: Kendall Busch is a fourth-generation sugar beet farmer and current president of the Nebraska Sugarbeet Growers Association.

It’s no surprise, then, that the sugar farmers who heard President Donald Trump speak at this week’s Farm Bureau convention were impressed.

“Our farmers deserve a government that serves their interest and empowers them to do the hard work that they love to do so much,” the President told a cheering crowd of nearly 5,000.

And part of what he promised was a strong farm safety net that will help growers deal with falling commodity prices, weather disasters, and other challenges outside their control.

“I’m looking forward to working with Congress to pass the Farm Bill on time so that it delivers for all of you,” he said. “We are working hard on the Farm Bill, and I think it’s going to go well.”

Galen Lee, a sugarbeet farmer from New Plymouth, Idaho, attended the speech.

“It’s obvious that the President appreciates America’s farmers and ranchers and wants to do everything in his power to help us succeed and to help rural America rebuild,” said Lee, who is president of the American Sugarbeet Growers Association.

Improving rural broadband availability, rolling back onerous government regulations, and the recently passed tax package were among the other topics on which the President spoke.

Ryan Weston, who represents sugarcane producers from Florida and Texas, was in Nashville for the event and said that these types of investments are sorely needed to keep American agriculture competitive in a global market that is grossly distorted by foreign subsidies and trade barriers.

On trade, President Trump told the group, “We are reviewing all of our trade agreements to make sure they are fair and reciprocal.”

And that was music to the ears of Neil Rockstad, a sugarbeet grower from Hendrum, Minnesota.

“America’s sugar farmers have been asked to take a backseat to subsidized foreign sugar industries for too long,” he said. “That’s hurt our price and led to the closure of numerous sugar mills and farms. It’s refreshing to have a leader in the White House who insists that trade be both free and fair to America’s farmers.”

President Trump’s support for rural America shouldn’t come as a surprise. He knows how important agriculture is to America’s economy, security, and moral fabric.

​“We are witnessing a new era of patriotism, prosperity, and pride,” he concluded. “And at the forefront of this exciting new chapter is the great American farmer.”

The Sugar Policy Modernization Act proposal is different than previous attacks in that it is a "comprehensive dismantling of sugar policy," said Kevin Price, director of governmental affairs for American Crystal Sugar Co., who lobbies on behalf of the Moorhead, Minn., based beet cooperative.

Price likened the difference to that of a shotgun blast, rather than the rifle shots of the past that have addressed pieces of the policy. "They're trying to tear it down from A to Z," Price said. "We've seen all of these ideas before. None of them have been accepted by Congress, and we anticipate Congress will reject this as well."

U.S. sugar policy supports domestic production by limiting imports of sugar that domestic producers say are often subsidized by foreign governments.

The Sweetener Users Association applauded the act and its sponsors Reps. Virginia Foxx, R-N.C., and Danny Davis, D-Ill.; and Sens. Jeanne Shaheen, D-N.H., and Pat Toomey, R-Pa. "The legislation has already been endorsed by dozens of cosponsors in the House and Senate," the SUA said.

Does it all

The sugar users — all customers of American Crystal and its marketing arm — said the act "does it all" and would "help American businesses of all sizes, consumers, workers and families — without costing taxpayers."

"It is very rare that Congress has the chance to consider legislation that will do so much for so many," said Rick Pasco, president of the SUA. The act "reforms unnecessary sugar regulations" and ensures that companies can "access sugar when they need it." By assuring "access to reasonable supplies" the bill "will encourage companies to continue manufacturing food and beverages in the United States, not offshore."

The SUA cited a Commerce Department study that said three U.S. manufacturing jobs are lost for "every sugar-related job" preserved by current sugar "subsidies."

"The bill leaves in place smart protections to ensure the sugar market operates freely without unnecessary government intrusion — and without costs to taxpayers," the SUA said.

The SUA described sugar as "the most tightly controlled commodity in the United States" and the "only commodity not reformed by Congress in the 2014 farm bill." They contend that the current policy forces American consumers to pay "up to $3 billion a year to subsidize very profitable U.S. sugar processors."

Price thinks the logic that will defeat the bill is the knowledge that the current policy supplies reasonably priced sugar of trustworthy supply, supports jobs and at zero cost to the taxpayer.

U.S. Sugar Policy Projected to Cost Taxpayers $0 through 2027

The String of Zeroes ContinuesSeptember 30 marked the end of the 2016 fiscal year, and with it, yet another 12-month period that U.S. sugar policy operated at no cost to the American taxpayer. And, as we are one-third of the way through with FY2017, the Congressional Budget Office (CBO) signaled its expectation that sugar's recent run of zeroes will continue.